Outlook 2025: Roelof Salomons (BlackRock)
This column was originally written in Dutch. This is an English translation
By Roelof Salomons, Chief Investment Strategist, BlackRock
What is the economic outlook for 2025?
'Economics is about supply and demand. About scarcity. And about the price we put on it. Most investors grew up in times when supply was not an issue. Analysts mainly looked at the demand side of the economy. An assessment of the economic cycle was often enough to know where to invest. Those times are over.
As in recent years, we face changes in structural trends (such as demographics, deglobalisation and digitalisation). Shocks will mainly affect the supply side of the economy. The extent of their impact, the interaction with the demand side and the reaction of policymakers will determine which scenario we are in and how investors should invest. Investing only through cyclical glasses is not enough.
Our base case assumes higher inflation and interest rates than is currently the consensus. This is especially true in the US, where the economy remains strong. Crucial are investments in technology. These may be inflationary in the short term, but in the long term the hope that it drives productivity prevails. Despite high valuations, US stocks will continue to outperform European ones. Geopolitical fragmentation will also not be the catalyst to shrink the valuation gap. Rather, emerging markets will benefit from changes in supply chains. Within bonds, we maintain a preference for Europe, where growth is lagging and interest rates can and should be lowered further. With the current low credit fee, corporate bonds are attractive only for the coupon. Price gains will be limited and we prefer short-term debt or exposure to private markets where active risk is more rewarded.'
Our base case assumes higher inflation and interest rates than is currently the consensus.